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The Demand for Cigarette Smuggling

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  • Saba, Richard P, et al

Abstract

When taxes raise the full price of a good above that in nearby jurisdictions, consumers have an incentive to cross into the lower-price jurisdiction to make purchases. Using a simple microeconomic model of the consumer's border-crossing decision, the authors derive an econometric model to test the significance of border crossing and estimate the magnitude of the resulting sales. Examining cigarette sales in the continental United States over the period 1960 to 1986, they find strong evidence that border crossing is a significant factor in explaining sales differentials between states. Implications for demand estimation and excise tax policy are discussed. Coauthors are T. Randolph Beard; Robert B. Ekelund, Jr.; and Rand W. Ressler. Copyright 1995 by Oxford University Press.

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Bibliographic Info

Article provided by Western Economic Association International in its journal Economic Inquiry.

Volume (Year): 33 (1995)
Issue (Month): 2 (April)
Pages: 189-202

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Handle: RePEc:oup:ecinqu:v:33:y:1995:i:2:p:189-202

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Citations

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Cited by:
  1. Alamar, Benjamin Ph.D. & Mahmoud, Leila J.D. & Glantz, Stanton A. Ph.D., 2003. "Cigarette Smuggling in California: Fact and Fiction," University of California at San Francisco, Center for Tobacco Control Research and Education qt4fv0b2sz, Center for Tobacco Control Research and Education, UC San Francisco.
  2. Gandelman Néstor & Hernández-Murillo Rubén, 2004. "Tax Competition and Tax Harmonization With Evasion," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 4(1), pages 1-24, May.
  3. Aili Malm & George Tita, 2006. "A spatial analysis of green teams: a tactical response to marijuana production in British Columbia," Policy Sciences, Springer, vol. 39(4), pages 361-377, December.
  4. Ferrier, Peyton Michael, 2009. "The Economics of Agricultural and Wildlife Smuggling," Economic Research Report 55951, United States Department of Agriculture, Economic Research Service.
  5. Leal, Andrés & López-Laborda, Julio & Rodrigo, Fernando, 2009. "Prices, taxes and automotive fuel cross-border shopping," Energy Economics, Elsevier, vol. 31(2), pages 225-234.
  6. Michelle Inness & Julian Barling & Keith Rogers & Nick Turner, 2008. "De-marketing Tobacco Through Price Changes and Consumer Attempts Quit Smoking," Journal of Business Ethics, Springer, vol. 77(4), pages 405-416, February.
  7. Richard Ault & Robert Ekelund & John Jackson & Richard Saba, 2004. "Smokeless tobacco, smoking cessation and harm reduction: an economic analysis," Applied Economics, Taylor & Francis Journals, vol. 36(1), pages 17-29.
  8. DeCicca, Philip & Kenkel, Donald & Liu, Feng, 2013. "Excise tax avoidance: The case of state cigarette taxes," Journal of Health Economics, Elsevier, vol. 32(6), pages 1130-1141.
  9. Ferrier, Peyton Michael, 2008. "Illicit Agricultural Trade," Agricultural and Resource Economics Review, Northeastern Agricultural and Resource Economics Association, vol. 37(2), October.
  10. Néstor Gandelman, 2005. "Community tax evasion models: A stochastic dominance test," Journal of Applied Economics, Universidad del CEMA, vol. 0, pages 279-297, November.
  11. Decicca, P. & Kenkel, D. & Mathios, A., 2000. "Putting Out the Fires: Will Higher Taxes Reduce Youth Smoking," Papers 00-3, Aarhus School of Business - Department of Economics.
  12. Devereux, M.P. & Lockwood, B. & Redoano, M., 2007. "Horizontal and vertical indirect tax competition: Theory and some evidence from the USA," Journal of Public Economics, Elsevier, vol. 91(3-4), pages 451-479, April.
  13. Stehr, Mark, 2005. "Cigarette tax avoidance and evasion," Journal of Health Economics, Elsevier, vol. 24(2), pages 277-297, March.
  14. Andrés Leal & Julio López-Laborda & Fernando Rodrigo, 2010. "Cross-Border Shopping: A Survey," International Advances in Economic Research, Springer, vol. 16(2), pages 135-148, May.
  15. Craig Lemboe & Philip Black, 2012. "Cigarettes taxes and smuggling in South Africa: Causes and Consequences," Working Papers 09/2012, Stellenbosch University, Department of Economics.
  16. Garrett, Thomas A. & Marsh, Thomas L., 2002. "The revenue impacts of cross-border lottery shopping in the presence of spatial autocorrelation," Regional Science and Urban Economics, Elsevier, vol. 32(4), pages 501-519, July.
  17. Banfi, Silvia & Filippini, Massimo & Hunt, Lester C., 2005. "Fuel tourism in border regions: The case of Switzerland," Energy Economics, Elsevier, vol. 27(5), pages 689-707, September.
  18. Todd M. Nesbit, 2005. "The Revenue Impacts of Cross-border Sales and Tourism: Wine and Liquor Taxation," Working Papers 05-12 Classification-, Department of Economics, West Virginia University.

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